1. Mandatory Nature of Pre-Litigation Mediation under Section 12A of the Commercial Courts Act, 2015
Core Issue: Whether the statutory pre-litigation mediation contemplated under Section 12A of the Commercial Courts Act, 2015 (as amended in 2018) is mandatory or directory for commercial suits that do not contemplate urgent interim relief.
Holding: Mandatory. Section 12A is imperative in nature. A plaintiff who does not contemplate urgent interim relief must exhaust pre-litigation mediation before instituting a commercial suit. Non-compliance must result in the rejection of the plaint under Order VII Rule 11 of the CPC.
Key Paragraphs: Paragraphs 43, 53, 63, 66, and 84.
Ratio:
"Any other interpretation would not only be in the teeth of the express language used but, more importantly, result in frustration of the object of the Act and the Rules... The right of suit itself will fructify only when the conditions in Section 12A are fulfilled." (Paragraph 43)
2. Suo Motu Power of Courts to Reject Plaints under Order VII Rule 11 CPC
Core Issue: Must the power to reject a plaint for non-compliance with Section 12A be exercised only upon an application by the defendant, or can the court act suo motu?
Holding: The court can exercise its power under Order VII Rule 11 suo motu at the initial stage before issuing summons if it finds the suit is barred by law (including non-compliance with Section 12A).
Key Paragraphs: Paragraphs 67 and 68.
Ratio:
"Order VII Rule 11 does not provide that the court is to discharge its duty of rejecting the plaint only on an application... the power under Order VII Rule 11 is available to the court to be exercised suo motu." (Paragraph 68)
3. Inadmissibility of Post-Institution Mediation as Substantial Compliance
Core Issue: Can a court cure a violation of Section 12A by keeping the suit in abeyance post-institution and referring the parties to mediation?
Holding: No. In a suit where no urgent interim relief is contemplated, there can be no "substantial compliance" through post-institution reference to mediation. The suit must be barred and visited with the rejection of the plaint.
Key Paragraphs: Paragraphs 48 and 63.
Ratio:
"In regard to a suit covered under Section 12A of the Act, namely, in a suit where interim relief is not contemplated, there can be no substantial compliance by way of post institution reference to mediat
ion." (Paragraph 63)
4. Prospective Operation of the Judgment
Core Issue: Given the conflicting views among High Courts and the teething problems of a newly amended law, should the declaration that Section 12A is mandatory be applied retrospectively or prospectively?
Holding: The declaration of law making Section 12A mandatory is made effective prospectively from August 20, 2022, to protect past transactions, avoid unnecessary reopening of closed matters, and allow stakeholders to become informed.
Key Paragraphs: Paragraphs 83 and 84.
Ratio:
"We declare that Section 12A of the Act is mandatory and hold that any suit instituted violating the mandate of Section 12A must be visited with rejection of the plaint under Order VII Rule 11... We, however, make this declaration effective from 20.08.2022 so that concerned stakeholders become sufficiently informed." (Paragraph 84)
